U.S. policy for credit cards in Cuba too lenient, critics say

This Dec. 19, 2014 file photo shows tourists taking photos along the waterfront promenade known as the Malecon in Havana.
Ramon Espinosa
AP

U.S. residents who travel to Cuba will be able to use a MasterCard issued by Florida-based Stonegate, the bank announced this month. But what happens if they use the card in a hotel owned by the Cuban military or a property seized by the Cuban government from U.S. owners in the 1960s?

For now, nothing. Since January 2015, the Obama administration has allowed U.S. visitors to use credit and debit cards in Cuba. One day before President Barack Obama arrived in Havana March 20, the administration also licensed Starwood hotels to administer two Cuban hotels and spend money remodeling them.

One of those hotels, the Quinta Avenida Habana, is owned by the Gaviota Tourism Group, a company owned by Cuba’s Revolutionary Armed Forces. Gaviota dominates the island’s tourist industry, with more than 20,000 hotel rooms.

Details of the Starwood deal have not been made public, and neither the company nor Stonegate replied to el Nuevo Herald requests for comment on this story.

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But critics of the new Obama policy toward Cuba believe that both the credit card and hotel agreements violate the U.S. embargo and are not in line with the administration's declared policy of “empowering the Cuban people.”

Former U.S. Rep. Lincoln Diaz-Balart said the use of credit cards by authorized travelers is allowed, but would violate Section 103 of the 1996 Helms-Burton law if the transactions involve properties seized by the Cuban government from U.S. owners.

The Obama administration “tries to justify legal actions by pointing to one part of the law, but they are violating other parts,” said Diaz-Balart. “When you talk about offering financing and stolen properties, I think you are violating the law.”

Mauricio Claver-Carone, executive director of the U.S.-Cuba Democracy PAC, said Section 103 “has no exceptions as written.” The Obama administration, he added, has been “stretching” embargo rules to introduce new “exceptions” that derive from previous exceptions but are “inconsistent” with other parts of the law.

Claver-Carone, who follows Cuba policy closely on his blog, Capitol Hill Cubans, said the license issued to Starwood is “inconsistent” with the policy of “empowering the Cuban people” because it would benefit the military, not private business people.

In the case of Stonegate, he said, the U.S. Treasury Department should require the bank to set up a system to certify that transactions with its credit card will not involve confiscated U.S. properties.

A Treasury statement sent to el Nuevo Herald said its Office of Foreign Assets Control “does not consider the use of credit cards by authorized travelers in Cuba to be transactions subject to the prohibition in Section 103.”

Pedro Freyre, a lawyer at Miami-based Ackerman Senterfitt who advises companies interested in doing business in Cuba, said the administration's interpretation of Section 103 “is the correct one.”

“I believe that Congress did not intend to limit credit card transactions to authorized travel,” he said. “If you go to the law itself, in the definition of trafficking [with confiscated properties] there is a specific exemption for travel-related transactions. That indicates the intent of Congress when it approved the law.”

Diaz-Balart, a Miami Republican who was one of the drafters of Helms-Burton, said that although the law does include that exemption, the intent of Congress was to outlaw any form of investments on the island and financing for the government. “The law has not changed, and the embargo has not been lifted,” he said.

Legal studies generated by both sides of the policy debate over Cuba have reached different conclusions, but all agree that Section 103 would take precedence.

The law firm of Steptoe & Johnson LLP concluded in January of 2015 that the new rules allowing the use of debit and credit cards “were inconsistent with the prohibitions in the U.S. law related to indirect financing of confiscated properties in Cuba.”

A report commissioned by the Cuba Study Group from the law firm Hogan Lovells in 2011 on executive branch powers concluded the president could allow U.S. banks to offer Cuba financing for transactions linked to the provision of authorized services. “Any such authorizations, however, would be subject to the prohibitions set forth in Section 103” and other laws “on the provisions for transactions involving property confiscated by the Cuban government.”

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